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Stepping into the executive offices of Estée Lauder on the 40th floor of the General Motors building is like stepping into an alternative reality—shimmering turquoise carpeting, high-backed Victorian armchairs, plush sofas, Art Nouveau wallpaper and floor-to-ceiling windows covered by rich cream draperies. Apart from a small reception desk at one end of the long room, the only marked difference between this and the salon in founder Estée Lauder's Palm Beach home is that behind the drapes lies not the Atlantic Ocean but Central Park, upper Manhattan, the Hudson River and the George Washington Bridge.

It was a bold decision, both for William Lauder, who literally grew up in the business, and for Freda, a 23-year veteran of Procter & Gamble, who had worked all across Europe on brands as diverse as Dash detergent, Splendid coffee, Pringles and Pantene shampoo. At P&G, Freda earned a reputation as a fixer, often parachuting in to revive troubled brands—or as he puts it in his mellifluous Italian accent, "as a leader who could create a different future, a leader of transformation."

Freda has brought a global perspective to Estée Lauder brands, developing them locally, rather than simply exporting products from the U.S.
Matthew Furman for Barron's

That's exactly what William Lauder, now executive chairman of the company, was looking for. Lauder, 50, is quite candid in describing the problems he faced. "My name being what it is, often times there were executives who heard what I said, nodded and didn't do it." Some openly opposed him. "It was time to find some fresh blood," he says.

William's father, Leonard Lauder, 78, who stepped down as CEO in 2000 after running the company for 17 years, agrees: "He came in with a totally different experience, a totally different take on things. He was well-versed in consumer insights, and we were well-versed in intuitive thinking. It was a match made in heaven."

In addition to the intense focus on brands and execution that is central to Procter & Gamble, Freda also understood the luxury business, having worked in marketing and strategic planning at Gucci.

Lauder and Freda first sat down together in 2007. Though they talked for hours, Lauder says, "He had me at 'Hello.' " Freda joined as president of Estée Lauder in March 2008. Soon after, a cadre of senior executives left the company. The rest quickly signed on to his vision. "Because Fabrizio was not an old friend who had been around the block with everybody for many years, he could bring a new way of managing to the company," says William Lauder.

For his part, Freda, who was named CEO in July 2009, is quick to praise the talent, diversity and creativity at the 66-year-old firm—forces that elevated the company into the second-largest cosmetics company in the world, after
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In fiscal 2011, which ended in June, Estée Lauder earned a record $701 million, or $3.69 a share, on record sales of $8.8 billion. This year, earnings per share are forecast to rise 23%, to $4.53, on a 10% increase in revenue. The shares, which traded last week at above $112, are up 233% since Freda became CEO.

FREDA GREW UP IN NAPLES, in a house perched on a hill with a view of the Mediterranean, where his parents still live. "We had a little boat in the harbor. I would study and then take the boat at one o'clock and reach Capri Island and come back or swim in the afternoon with friends," he recalls.

But it was not all play. His father, Domenico, founded and ran a global construction company that operated throughout Italy, Eastern Europe and the Middle East. When he was 15, Freda started traveling with his father, consulting with him on what areas to develop and why. "My discussions with my father were always about the future opportunities," he says.

After graduating from the University of Naples Federico II with a degree in economics and business administration in 1981, Freda was accepted into the master of business administration program at Dartmouth's Amos Tuck School of Business. But before leaving, he met with recruiters for P&G, and was offered a job. "I said, 'Oh, thank you, but I'm leaving for the United States.'"

After getting a call from the general manager of P&G's Italian business, Freda changed his mind and took a job as assistant brand manager for Dash laundry detergent in Italy.

ON MOVING TO NEW YORK four years ago with his wife, Mary-Ann, and their son and daughter, both now teenagers, Freda acted quickly. "I think to be a turnaround guy, you need to have very little patience for the status quo," he says. "I really have no patience for what is not working, for what is not sustainable, for what is not healthy in a business or in an organization. And I have a real sense of urgency of challenging the status quo when things do not work."

Status quo was precisely what was holding the company back. Estée's brands were run independently, and competed with one another. And rather than using consumer data to help make decisions, the managers relied on their guts—a 20th-century approach in a vastly more complex 21st-century market.

Freda radically simplified the company's business structure, laying off 2,000 people—about 6% of the workforce—and trimmed underperforming brands. He also pushed heavily into emerging markets, and developed a new strategy to reinvigorate the company's anemic North American business.

Since then the company has developed a 10-year plan called "Compass" to drive growth. While Freda declines to discuss specifics, he says it involves a heavy push into digital areas—both e-commerce and social media—as well as building brands from the ground up in emerging markets.

FOR ESTÉE LAUDER, THE MOST important of these markets is China, where sales grew 34% in the first quarter of fiscal 2012. Much of the credit for the company's ability to tap into that growth opportunity goes to Freda's non-U.S.-centric mind-set.

"Over the years, we've been very, very good at bringing the best of North America to the rest of the world, and we continue to be good at doing that," Freda says. "But now we are going to the next level: Like we've done for North America, we will take the best of Japan, the best of China, the best of Italy, the best of France, the best of Brazil and bring this to the rest of the world as well."

In Asia, for example, women are particularly concerned with skin discoloration, or hyperpigmentation. So Estée Lauder's China laboratories have developed specialized treatments for that market. The company has since brought those products to the U.S., where Freda says they've been "an amazing success."

Similarly, women in Brazil like eye-catching makeup, so brands like M.A.C. are targeting new products and services for them. In Europe, wrinkles are the big concern, and in Russia, fragrances are key. "If you live outside of the U.S., it is evident that the aspiration of the world, from India, to Japan or China or Italy, is not to become all the same."

Another opportunity is retail for travelers. Once confined largely to duty-free shops, airport retailing has become a key element of Estée's strategy. More and more women are traveling for business worldwide, Freda points out. It's a captive consumer audience and the overhead is lower than in traditional department-store settings, so profit margins are higher. Caris & Co. estimates that travel retail represents 10% to 15% of Estée Lauder's annual sales, and as much as 20% of operating profit.

DEPARTMENT STORES, TOO, ARE NOW seen as avenues for growth, after years of decline. When Freda took over as CEO, mass-market cosmetics such as Revlon, Cover Girl and Maybelline, mostly sold in drug stores and big-box retailers, had been growing faster than so-called prestige cosmetics like Estèe's for years. Beauty-product sales in U.S. department stores fell nearly 8%, to $7.8 billion, in 2009 from the prior year's, compared with a drop of 3% for the U.S. beauty industry as a whole, according to Euromonitor International.

Accounting for 54% of sales, department stores are Estée's largest category. Rather than accept their decline as inevitable, Freda abandoned longtime sales practices like hiding price tags and keeping makeup in glass cases, and began rolling out new types of counters that allowed shoppers to browse on their own. He also challenged his product-development team to focus its innovation efforts on big brands and create gateway products to lure mass-market consumers over to prestige cosmetics.

All of Estée Lauder's key brands, in fact, are now taking market share from mass-market products, Freda says. In fiscal 2011, Estèe's department-store sales were up 10% in North America, a market that everyone said was dead.

On the digital front, Freda says the company plans to add 50 e-commerce sites to specific markets, and is ramping up its mobile marketing. Social media, he adds, will become increasingly important to Estée Lauder, and to retailing in general.

That's not to say that the company isn't also dedicated to what it calls "high-touch" service. "Service means customization of the product which is right for your skin, because we analyze your skin. Service means education. We'll teach you how to do your makeover, rather than just give you mascara. Service means making you feel really welcome in the shopping experience." It's a value proposition that Freda expects to be particularly effective in a market like Brazil, where 95% of cosmetic sales are of the mass-market variety.

ALTHOUGH OUTSIDERS ARE OFTEN reluctant to step into the top job at a family-controlled company—the Lauders own 43% of the company's stock, and control 88% of the voting shares—Freda sees it as an advantage, rather than an impediment. "Frankly, it has been a fantastic experience, because the Lauder family has brought the values to this company—the energy, the passion and a lot of the ideas that have made this company great," he explains. Freda adds that the Lauders gave him the authority to make big changes and have supported him every step along the way.

In turn, he has helped make one of the country's wealthiest families wealthier still.

At Estée Lauder's annual meeting in November, at Essex House on Central Park South in Manhattan, Freda greeted each member of the Lauder family graciously before his presentation began. But the preponderance of shareholders in the room, women of a certain age with perfectly coiffed grey hair, seemed less interested in dividends and stock splits than in discontinued lip colors and skin care.

And all seemed united in their enthrallment with the calm and debonair Freda, who wears a Breast Cancer Awareness pin studded with pale pink stones in the lapel of his custom-made suit. (The pink ribbon is the symbol of the Breast Cancer Research Foundation, a cause begun and long championed by Evelyn H. Lauder, who died in November.) After all, Freda is the leader of one of only six Fortune 500 companies in which women comprise more than 40% of the board.

Clearly, he knows whom he serves. "Women," he told the assemblage, "don't wear cosmetics only to attract men. That's secondary. They do it for themselves." As if on cue, came adoring—and well-deserved—applause.